7 pieces of homebuying advice you can't afford to ignore

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Purchasing a home is a huge accomplishment for many people, and the financial commitment is not to be taken lightly.

To help you avoid making the process any costlier than it already is, Business Insider has gathered some of the best homebuying advice from real estate experts, bestselling authors, and financial planners that could save you money and time.

Below, check out seven pieces of homebuying advice you simply can't afford to ignore:

1. Make sure your credit is in order well before you start shopping

When you apply for a mortgage, your interest rate for paying back the loan will depend partially on your credit history.

"A big thing when it comes to your mortgage is being able to qualify for the best interest rate you can," Sophia Bera, CFP and founder of Gen Y Planning, told Business Insider.

"Think about it: If you're going to have this loan for the next 15 to 30 years, you're going to be paying a ton of interest, tens of thousands if not hundreds of thousands of dollars on that loan," she said. "So a difference in interest of a quarter of a percent or half a percent or one percent makes a huge difference over the life of the mortgage."

While you can monitor a close approximation of your credit score throughout the year on sites like Credit Karma and Credit Sesame, Bera says it's worth paying a small fee to get your exact FICO score when you're preparing to buy a house. FICO scores are credit measures widely used by lenders to determine interest rates, and a high FICO score can help you secure the most reasonable ones.

"Really pay attention to credit, especially in the six months leading up to getting ready to buy a home," Bera says. "This is not just a month before, scrambling and then realizing, 'Oh my gosh, I have something old in collections!' Once you take care of that it usually takes a couple of months to be reflected on your credit score."

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2. Don't use your emergency savings for a down payment

When it comes to buying a home, the more you have in savings, the better. But the money you're putting away for a down payment — typically 20% of the price of the home — should remain completely separate from your emergency fund, which is three to nine months of expenses earmarked for when something goes wrong.

Instead, it's best to keep your home savings somewhere else safe and liquid, self-made millionaire and bestselling author David Bach told Business Insider, particularly if you're looking to purchase in about three years.

"I'd tell you, put it in a money market account, and the reason is this: There's nothing more painful than saving for a down payment for a home and having the market go down," said Bach, who has spent 25 years in the wealth management industry.

"When it's a short-term time horizon, which is what three years is — three years is almost like tomorrow — you're better off to have safety and liquidity and see yourself making progress every month and not be losing sleep over it," he said.

In addition to security, a money market account could earn an interest rate of 1%, compared with the much lower 0.01% on a traditional savings account. These accounts can offer a higher interest rate because they usually require a minimum balance, which can vary widely depending on the bank (and if you dip under the minimum, you may incur a monthly fee). 

A high-interest, online savings account yields a similar return.

3. Plan to spend no more than 30% of your income on housing

Personal finance experts say a good rule of thumb is to make sure your total monthly housing payment doesn't consume more than 30% of your take-home pay.

"Any more than that, and your finances are going to be tight, leaving you financially vulnerable when something inevitably goes wrong," write Harold Pollack and Helaine Olen in their book, "The Index Card." "To be fair, this isn't always possible. In some places such as New York and San Francisco, it can be all but impossible."

Scott McGillivray, a real estate expert and the host of HGTV's "Income Property," suggests calculating what a realistic mortgage would cost and putting the equivalent of that into savings each month before you plan to buy.

"The truth is, if you can't do that — if you can't put that money aside and you can't actually keep those savings every month — you may not be prepared to make your consistent mortgage payment," he says.

It's not a perfect model for what it would be like to pay a mortgage each month, since you're likely still forking over money for rent, but it proves that you're dedicated to the process and willing to make financial sacrifices in order to afford homeownership.

See the rest of the story at Business Insider